The Saudi stock market is in turmoil. Investors are losing their confidence and pulling money out of the country. The disappearance of journalist Jamal Khashoggi, which has brought Saudi Arabia under the spotlight, proved to be a major market event. President Trump vowed “severe punishment” if the journalist was killed. Initially, the country’s Crown Prince, Mohammed bin Salman, denied knowledge about this death.
However, following the most recent development, Saudi Arabia is expected to issue a report on Khashoggi and acknowledge the death of the journalist due to an interrogation that went wrong. The purpose was just to abduct him, but the operation was not cleared by the authorities and individuals will now be held accountable. Yesterday, President Trump also suggested that rogue action may have taken place.
It is unsure how many believe such a statement, but the question is how Donald Trump will proceed after this. The reason he is involved is because of his close relations to Saudi and his recent visit to the country that showed the word their strong ties. All this is thanks to his son in law, Jared Kushner, the White House adviser who masterminded the entire new relation with Saudi Arabia after the Obama administration clearly made their distance.
Mohammad Bin Salman appears to be one of the most proactive people the kingdom has ever had. Nobody has ever tried to convince several business leaders that they should use Saudi Arabia as the platform for their research labs the way he did. During his recent visit to the U.S., he met with Silicon Valley leaders and top executives. This kind of move is unprecedented and clearly shows that he is eager to diversify the country’s economy. In other words, he could be after creating another Silicon Valley in Saudi Arabia.
After holding a successful Economic Reform Event in 2017, MBS decided to create the “Davos in the Desert” but it failed. Major media outlets and business executives have decided not to participate.
JP Morgan CEO and Ford’s Chairman are just a few top executives in that category. If you want to attract Foreign Direct Investment FDI, businesses need assurance that they have the freedom to conduct their business, news wires have the freedom to report the actual picture and the political situation is stable enough.
Saudi Arabia tied itself in unnecessary wars with neighbouring countries. Despite all these, businesses were still likely to consider the country as an option, but after Trump’s “severe punishment” remark, things have changed.
Whether Trump really adopts a tough stance against Saudi Arabia remains to be seen. In the meantime, the Saudi stock index plunged nearly 7% during the session on Sunday after Trump’s initial comments and bounced back up yesterday after his softer tone. The index is up nearly 1.53% year to date, but these gains are under threat again as the sell-off is picking up steam. Trump has left it open whether his administration will be part of the investment summit in Saudi Arabia.
If the situation between Saudi Arabia and the U.S. becomes intense, one thing that will be at threat is the peg between the Saudi Riyal and the dollar . We have seen this peg coming under serious pressure when the price of oil dropped at the lower 20s.a
